3. Establishing the terms and conditions of employment

3.1 Industrial awards

An industrial award is a legally binding document that outlines the wages and conditions of employment for groups of employees in an industry or occupation, for example, the Western Australian Hairdressers Award 1989. Unions are generally party to an award. Western Australian awards are made by the Western Australian Industrial Relations Commission. Traditionally, Commonwealth awards were made by the Australian Industrial Relations Commission.

In March 2006, the Work Choices legislation sought to combine Commonwealth and State awards into a single national system. There are now a number of different types of awards in the national system including:

• pre-reform awards - federal awards created by the Australian Industrial Relations Commission before the Work Choices legislation came into operation on 27 March 2006, covering employers that are constitutional corporations;
• transitional awards - federal awards created before 27 March 2006, covering employers that are not constitutional corporations; and
• notional agreements preserving state awards (NAPSAs) - State awards created before 27 March 2006, covering employers that are constitutional corporations.

Since the change of Federal Government in 2007, new legislation has been enacted requiring an award modernisation process to be undertaken by the Australian Industrial Relations Commission. This process involves the creation of 'modern awards' to replace pre-reform awards and NAPSAs. It is expected that most employers in the federal system will be covered by a modern award from 1 January 2010.

Employers cannot generally provide employees with conditions of employment that are less favourable than award conditions, but may provide conditions that are more favourable than the award conditions. They may also enter into arrangements with employees in relation to matters that are not dealt with by the award.

If an employer enters into a collective or individual Commonwealth agreement, an award that would otherwise apply generally has no effect. Commonwealth agreements are now subject to a no-disadvantage test.

State awards covering employers that are not constitutional corporations continue to apply in the State industrial relations system. Western Australian awards can only apply to employers that are in the State industrial relations system (that is, employers that are not constitutional corporations).

As indicated above, Commerce will be able to assist incorporated associations that are not constitutional corporations to determine whether they are required to apply a State award in their particular circumstances. Incorporated associations that are constitutional corporations can seek advice about award coverage from the Workplace Infoline on 1300 363 264.

An employment contract based on an award might simply be a letter which acknowledges that the position is subject to the provisions of a particular award.

3.2 Australian Workplace Agreements (AWAs)

An AWA is an agreement between an individual employee and an employer, which regulates the employee's terms and conditions of employment and which forms the basis of the contract between the two parties.

Since the commencement of amendments to the Workplace Relations Act 1996 on 28 March 2008, no new AWAs can be made. AWAs made before 28 March 2008 continue to operate.

3.3 Individual Transitional Employment Agreements (ITEAs)

From 28 March 2008 until 31 December 2009, when the Commonwealth Government's substantial changes to industrial relations laws will come into operation, ITEAs can be made between certain employers and employees.

ITEAs are a written agreement between an individual employee and an employer setting out terms and conditions of employment. ITEAs are subject to a no-disadvantage test. ITEAs will nominally expire on 31 December 2009 when the proposed new Commonwealth laws take effect. 

3.4 Employer-employee agreements

If your association is not a constitutional corporation, it may be eligible to make use of a form of individual agreement known as an 'Employer-Employee Agreement' (EEA). In a broad sense, these are similar to AWAs and ITEAs, but they are regulated under the State system.

An EEA is a voluntary written agreement between an employer and employee, which generally replaces the provisions of an award and which forms the basis of the contract between the two parties. (Note that an EEA cannot be made while an industrial agreement, i.e. a collective agreement, applies to an employee's employment).

An EEA cannot be offered as a condition of employment. In offering EEAs, the employer must give a new employee the choice of an EEA or the applicable award, or, if there is no applicable award, a 'common law' contract of employment containing the same terms as an EEA. The maximum term of an EEA is three years.

EEAs must be registered by the Registrar of the Western Australian Industrial Relations Commission within 21 days of signing, and must pass a no-disadvantage test to ensure that employees are not worse off than they would be under a relevant award. This is analogous to the no-disadvantage test that is applied to collective agreements under the Commonwealth system.

There are also a number of other substantive and procedural requirements that must be met before an EEA can be registered.

3.5 Common law contract of employment

Common law contracts are individual agreements between an employer and an employee. Unlike statutory agreements (eg an AWA, ITEA or collective agreement), it is not possible to negotiate out of any applicable award or collective agreement provisions or conditions in a common law contract. Whether they are included in the contract or not, the terms of the award or collective agreement still apply.

Common law contracts may therefore be most useful to incorporated associations where there is no award that applies to its employees. However, any contract would still need to comply with the minimum conditions imposed by the applicable State and Commonwealth legislation.

3.6 Should the contract be in writing?

As noted earlier, it is not essential that a contract of employment be in writing, but it is certainly desirable. An AWA, ITEA or EEA must be a written document.

It is good practice to confirm any offer of employment in writing, and for the employee to accept the offer by returning a signed copy of the letter, accepting its conditions, before starting work. A letter of employment could cover:

• details of the duties required by the position;
• whether the position is full-time or part-time, casual or permanent;
• the award or agreement (if any) applying to the position; and
• any special or additional conditions that apply in the association's workplace.